By Shannon Najmabadi
February 22, 2021
Gov. Greg Abbott and Texas lawmakers are promising relief for Texans hit with massive electric bills after a winter storm bludgeoned the state’s power grid, leaving millions of residents freezing without electricity.
But how they’ll accomplish that remains unclear. The state’s deregulated electricity market not only allows for staggering price spikes, but effectively compels them for some customers.
While many Texans are on “fixed rate” electricity plans that insulate them from market swings, others pay rates tied to the spot price of wholesale electricity, which skyrocketed during the storm.
As the bad weather bore down, it froze natural gas production and wind turbines, choking off the supply of electricity as demand skyrocketed. In response, the Public Utility Commission, appointed by Abbott, let the wholesale market price of electricity rise to $9 per kilo-watt hour, a 7,400% increase over the average 12 cents per kilo-watt hour.
The rate hike was supposed to entice power generators to get more juice into the grid, but the astounding costs were also passed directly on to some customers, who were suddenly being billed more for electricity each day than they normally pay in a month.
Karen Knox, a special education teacher in Bedford, was among them. She lost power during the crisis but still owes some $7,000 to Griddy, an electricity provider located in Houston.
Griddy, the company Knox used, is one example of how the state’s deregulated system can funnel the cost of a power emergency down to its 29,000 customers.
The company buys electricity at wholesale prices, and passes the real-time rates along to its customers, who pay a $10 monthly fee for the service.
That lets customers save money when the price of electricity is low, but leaves them vulnerable to price hikes when the cost of electricity spikes.
It’s not clear how many Texans are on variable rate plans like Griddy’s. But the arrangement produced eye-popping costs for some during the storm — topping $17,000 for a man Dallas television station WFAA spoke to — which triggered outrage from Texans just beginning to pick up the pieces after a bruising week endured, at times, without electricity, heat or water. Over the weekend, Abbott vowed that scaling back the bills will be a top priority, and the state’s utility commission temporarily stopped electric companies from turning out the lights on customers who don’t pay.
“If they [the electric provider] don’t have a mechanism that allows them to do that in the immediate — like on the next bill or the next several bills — it’ll end up getting rolled into the overall cost of service,” she said. “It’s just a matter of whether it’s going to get passed on in an immediate way, in a shocking way … or spread out over time.”
Tim Morstad, associate state director with the Texas AARP, said “prices are going to rise” but with a delay for those not on variable rate plans.
“Forgive me for stepping back to say — this system is truly designed to have high prices and huge fluctuations. And putting consumers through that by design is a bad process. It’s setting people up for pain,” he said.
Experts said people who signed up with providers like Griddy might not have understood the risks associated with the plan, or may have been drawn to the game-like quality of using an app to track swings in electricity prices and change their behavior — similar to playing the stock market.
Read the full news article on The Texas Tribune